1346.092 
LISL  2 
1921 


c  .3 


L^^rinted  by  authority  of  the  State  of  Illinois.] 


THE  ILLINOIS  SECURITIES  LAW. 


§  1.  Name  of  law. 

§  2.  Words  and  phrases  defined. 

§  3.  Division  and  classification  of 

securities. 

§  4.  Class  “A”  securities  defined — 

not  subject  to  provisions  of 
Act, 

§  5.  Class  “B”  securities  or  exempt¬ 

ed  sales  defined. 

§  6.  Class  “C”  securities  defined. 

§  7,  Class  “C”  securities — statement 

— preliminary  approval — bond 
and  regulations  relating  to 
sales. 

§  8.  Class  “D”  securities  defined. 

§  9.  Statements  to  be  filed  relative 

to  Class  “D”  securities — de¬ 
tail  of  information  required — 
irrevocable  contract  for  issuer 
to  receive  at  least  80%  of  pro¬ 
ceeds  of  sale — summary  state¬ 
ments  —  information  verified 
by  officers  of  issuer. 

§  10.  Class  “D”  securities — inventory 
and  appraisement  —  Secretary 
of  State  may  designate  ap¬ 
praiser — qualifications  of  ap¬ 
praisers. 

§  11.  Examination  by  certified  public 
accountant  —  compensation  — 
investigation  by  Secretary  of 
State — when  capital  to  be  held 
intact — may  require  bond  and 
financial  statements. 

§  12.  Stock  issued  or  to  be  issued  for 
intangible  property  to  be 
placed  in  escrow. 

§  13.  Qualification  of  solicitors,  agents 
or  brokers  offering  securities 
of  issuer. 

§  14.  Dealer  may  sell  Class  “D”  se¬ 
curities  which  have  qualified 
by  submitting  statement  of 
amount,  description  and  price 
of  securities — qualification,  ex¬ 
perience,  etc.  of  dealer. 

§  15.  Twenty-five  copies  of  summary 
of  Class  “D”  securities  to  be 
deposited  with  Secretary  of 
State — caption  of  summary. 

§  16.  Issuers  and  individuals  to  file 
irrevocable  consents  to  service 
of  process. 


§  17.  Secretary  of  State  to  examine 
statements — may  refuse  to  file 
—  may  propound  interroga¬ 
tories. 

§  18.  Circuit  Court  of  Sangamon 
County  given  jurisdiction  to 
re\  '^w  ao+ions  of  Secretary  of 
State  witii  1  ight  of  appeal  by 
either  party. 

§  19.  Inducements  made  to  procure 
filing  to  be  reduced  to  writ¬ 
ing. 

§20.  Supplemental  statements  to  be 
filed. 

§  21.  Every  advertisement  to  bear  a 
caption  —  copy  of  advertise¬ 
ment  to  be  filed  with  Secre¬ 
tary  of  State  within  ten  days 
of  issue — no  reference  to  be 
made  concerning  compliance 
with  Act. 

§  22.  Secretary  of  State  to  mail  copy 
of  summary  statements  to 
any  one  requesting  same. 

§23.  Secretary  of  State  may  pre¬ 
scribe  and  furnish  forms. 

§24.  Injunctions  to  prevent  sales — 
and  to  enforce  provisions  of 
the  Act — power  of  Secretary 
of  State  to  suspend  or  cancel 
permission  to  sell  securities. 

§25.  Documents  filed  in  office  of  Sec¬ 
retary  of  State  open  to  in¬ 
spection  of  the  public. 

§  26.  Fees — see  also  section  7. 

§  27,  Oaths  to  be  administered  by  an 
officer  of  and  in  the  State  of 
Illinois. 

§  28.  Additional  copies  of  statements 
to  be  submitted  on  request  of 
the  Secretary  of  State. 

§  29.  Broker,  etc.  offering  to  sell  se¬ 
curities  without  compliance 
with  Act  guilty  of  a  misde¬ 
meanor — penalty. 

§  30.  Issuer  offering  to  sell  securities 
without  compliance  with  Act 
guilty  of  a  misdemeanor — 
penalty. 

§  31.  Person  or  corporation  violating 
Act  guilty  of  a  misdemeanor — 
penalty. 


ILLINOIS  STATE  LIBRARY 


1129  00360  6852 


2 


THE  ILLINOIS  SECUI 

§  32.  False  statements  made  by  brok¬ 
er,  etc.  not  authorized  by 
issuer  guilty  of  a  misdemeanor 
— penalty. 

§  33.  Signing  any  statement,  etc. 

knowing  same  to  be  false  is 
prima  facie  evidence  of  knowl¬ 
edge  of  falsity  —  perjury  — 
penalty. 

§  34.  Sale  of  ser'urities  with  knowl¬ 
edge  of  the  insolvency  of  the 
issuer  makes  party  selling 
same  guilty  of  embezzlement 
— penalty. 

§  35.  Any  person  interested  may  main¬ 
tain  action  to  recover  money 
in  excess  of  20%  not  paid  to 
issuer. 

§36.  Sale  contrary  to  information 
filed,  or  on  other  terms  is 
prima  facie  evidence  of  fraud. 

§  37.  Sales  contrary  to  Act  void — lia¬ 
bility  to  the  purchaser  for 
the  amount  paid  with  reason¬ 
able  attorney’s  fees  in  law  or 
equity.  Burden  of  proof  to 
establish  exemption  rests  urn 
on  issuer  or  seller  in  all  civil 
and  criminal  actions — viola¬ 
tions  to  be  referred  to  proper 
officers  for  prosecution.  So¬ 
licitors,  agents,  brokers, 
officers,  directors  and  all  per- 

(  Approved  and  in  Force  June  10, 

June  ] 


HES  LAW — Continued. 

sons  who  shall  sell  or  offer 
for  sale  securities  or  aid  or 
assist  therein  deemed  equally 
guilty  and  may  be  punished 
in  county  in  which  offer  or 
sale  was  made  or  in  county 
of  delivery.  Certificate  of 
compliance  or  non-compliance 
with  provisions  by  the  Secre¬ 
tary  of  State  shall  constitute 
prima  facie  evidence  and  shall 
be  admissible  in  evidence  in 
any  action  at  law  or  in  equity. 

§  38.  Act  does  not  relieve  corpora¬ 
tions  from  making  reports  as 
required  to  be  made  under 
other  existing  laws. 

§  39.  Foreign  corporations  desiring  to 
sell  securities  must  comply 
with  the  law  regulating  ad¬ 
mission  of  such  corporations. 


§ 

40. 

Prosecutions  under  Act  to 

be 

brought 

within  five  years. 

§ 

41. 

Invalidity 

of  one  provision 

or 

section 

does  not  affect 

re- 

mainder 

of  Act. 

§ 

42. 

Acts  repealed — certificate  or 

evi- 

dence  of  compliance  with  law 
repealed  not  to  be  exhibited — 
contractual  obligations  not  im¬ 
paired. 

I  §  43.  Emergency. 

1919,  AS  Amended  by  Act  Approved 

L,  1921.) 


An  Act  relating  to  the  sale  or  other  disposition  of  securities  and  pro¬ 
viding  jjenalties  for  the  violation  thereof  and  to  repeal  Acts  in  con¬ 
flict  th'e7‘ewith. 

Section  1.  Be  it  enacted  hy  the  People  of  the  State  of  Illinois, 
represented  in  the  General  Assembly:  This  Act  shall  be  known  as 
‘‘The  Illinois  Securities  Law.-’^ 

§  2.  The  words  and  phrases  used  herein  shall,  unless  the  context 
otherwise  indicates,  have  the  following  meaning: 

The  word  “securities’^  shall  mean  and  include  stock,  treasury  stock, 
bonds,  debentures,  investment  contracts,  notes,  evidences  of  indebted¬ 
ness,  participation  certificates,  certificates  of  shares  or  interest,  preor¬ 
ganization  certificates  and  subscriptions,  certificates  evidencing  shares 
of  or  interest  in  trust  estates  or  associations,  profit  sharing  agreements 
or  certificates;  or  any  certificate,  contract  or  instalment  whatsoever, 
representing  or  constituting  evidence  of,  or  secured  by,  title  to  or  interest 
in,  or  any  lien  or  charge  upon,  the  capital  or  any  property  or  assets  of 
the  Issuer  thereof,  and  any  oil,  gas  or  mining  lease,  and  interests,  units 
or  shares  in  any  such  lease  or  leases. 

The  word  “issuer”  shall  include  every  person  and  every  company, 
trust,  partnership  or  association  incorporated  or  unincorporated  here¬ 
tofore  or  hereafter  formed  which  shall  have  issued  or  which  shall  here- 


after  issue  any  security  sold  or  offered  for  sale  to  any  person  or  persons 
in  this  State.  « 

The  word  ‘^file’’  or  ^Tling’^  within  the  meaning  of  this  Act^  shall 
mean  the  endorsement  thereof  by  the  Secretary  of  State  on  any  state¬ 
ment  or  document  received  of  the  word  ^^filed’^  followed  by  the  month, 
day,  year,  and  name  of  Secretary  of  State,  for  the  purpose  of  showing 
that,  in  his  opinion,  the  issuer,  solicitor,  agent,  broker,  dealer  or  owner 
has  complied  with  the  provisions  of  this  Act. 

The  term  ‘'sale’"  shall  mean  and  include  contracts  and  agreements 
whereby  securities  are  sold,  traded  or  exchanged  for  money,  property 
or  other  thing  of  value,  or  amj  transfer  or  agreement  to  transfer,  in 
trust  or  otherwise.  Any  secmdty  given  or  delivered  with,  or  as  a  bonus 
on  account  of,  any  purchase  of  securities  or  other  thing  of  value,  shall 
be  conclusively  presumed,  to  constitute  a  part  of  the  subject  of  such 
purchase  and  to  have  been  sold  for  value.  The  term  ''self  means  any 
act  by  which  a  sale  is  made  and  the  term  ‘'sale''  or  ‘'offer  for  sale’'  shall 
include  a  siihscription,  an  option  of  sale,  a.,  solicitation  of  sale,  an  attempt 
to  sell,  or  an  offer  to  sell,  directly  or  by  an  agent,  by  a  circular,  letter  or 
advertising,  or  otherwise;  provided,  however,  that  nothing  herein  shall 
limit  or  diminish  the  full  meaning  of  the  terms  “sale,”  “sell”  or  “offer 
for  sale”  as  used  by  or  accepted  in  courts  of  law  or  equity.  (As  amended 
by  Act  approved  June  11,  1921. 

§  3.  For  the  purposes  of  this  Act  securities  are  divided  into  four 
classes,  as  follows: 

(1)  Securities,  the  inherent  qualities  of  which  assure  their  sale 
and  disposition  v/ithout  the  perpetration  of  fraud,  which  shall  be  known 
as  securities  in  Class 

(2)  Securities,  the  inherent  qualities  of  which,  or  in  the  nature 
of  one  or  both  parties  to  the  sale  thereof,  assure  their  sale  and  dis¬ 
position  without  the  perpetration  of  fraud,  which  shall  be  known  as 
securities  in  Class 

(3)  Securities  based  on  established  income,  which  shall  be  known 

as  securities  in  Class  • 

(4)  Securities  based  on  prospective  income,  which  shall  be  known 
as  securities  in  Class  “D”. 

§  4.  Securities  in  Class  ^^A^^  shall  comprise  securities : 

(4)  Issued  or  guaranteed  by  a  government  or  governmental 
agency,  or  by  any  body  having  power  of  taxation  or  assessment; 

(2)  Issued  by  any  National  or  State  bank  or  trust  company, 
building  and  loan  association  of  this  State,  or  insurance  company  or¬ 
ganized  or  under  the  supervision  of  the  Department  of  Trade  and 
Commerce  of  this  State; 

(3)  Issued  or  guaranteed  by  any  corporation  operating  any  pub¬ 
lic  utility  in  the  United  States  or  any  state  thereof  or  in  the  Dominion 
of  Canada  or  any  pn'ovmce  thereof  wherein  there  is  or  was  at  the  time 
of  issuance  thereof  in  effect  any  law  regulating  such  utilities  and  the 
issue  of  securities  by  such  corporation,  and  evidences  of  indebtedness 
secured  by  collateral  consisting  of  any  securities  herein  above  in  this 
paragraph  three  (3)  described,  provided  that  such  collateral  securities 


4 


equal  ill  par  value  125%  of  the  par  value  of  the  evidences  of  indehied- 
ness  so  secured; 

(4)  Listed  and  dealt  in  on  the  Xew  York,  Boston  or  Cliicago 
Stock  Exchange,  respectively,  pursuant  to  official  authorization  by  such 
exchanges,  respective!}',  and  securities  senior  to  any  securities  so  listed 
and  dealt  in,  or  guaranteed  hy  any  corporation,  the  common  capital 
stock  of  luhich  is  so  listed  and  dealt  in; 

(5)  Issued  and  outstanding  in  the  hands  of  the  pahlie  prior  to 
June  10,  1919,  of  corporations  ivhose  business  has  been  continuously 
in  operation  since  that  date,  provided,  that  financial  statements  of  the 
issuing  corporation  appeared  in  any  standard  manual  of  securities  for 
the  year  1920,  approved  by  the  Secretary  of  State,  or  provided  that 
quotations  of  such  securities  have  appeared  in  tabulated  market  reports 
published  as  neivs  items,  and  not  as  advertising ^  in  a  daily  neivspaper  of 
general  circulation  published  in  the  English  language,  in  any  city  of 
two  hundred  thousand  inhabitants  or  over  in  the  State  of  Illinois,  at 
least  twelve  times  in  each  of  the  years  1919  and  1920,  respectively,  and 
at  least  twelve  times  during  the  twelve  calendar  months  next  preceding 
the  offering  for  sale  thereof; 

(6)  Issued  by  any  corporation  organized  not  for  pecuniary  profit 
or  organized  exclusively  for  educational,  benevolent,  fraternal,  charitable 
or  reformatory  purposes; 

(?)  Being  notes  or  bonds  secured  by  a  mortgage  lien  upon  real 
estate  or  leasehold  (other  than  oil,  gas  and  mining  leases)  in  any  state 
or  territory  of  the  United  States  or  in  the  Dominion  of  Canada:  (a) 
when  the  mortgage  is  a  first  mortgage  on  real  estate  and  when  the 
aggregate  face  value  of  such  notes  or  bonds  (but  not  including  inter¬ 
est  notes  or  coupons)  secured  thereby  does  not  exceed  the  fair  market 
cash  value  of  such  real  estate;  (b)  tvhen  the  aggregate  face  value  of 
the  notes  or  bonds  (but  not  including  interest  notes  or  coupons)  se¬ 
cured  by  a  first  mortgage  lien  upon  real  estate  and  buildings,  in  good 
faith,  forthwith  to  be  erected  thereon,  according  to  the  terms  of  the' 
mortgage,  does  not  exceed  the  fair  market  cash  value  of  such  real  estate 
and  buildings  alid  each  of  such  notes  or  bonds  secured  thereby  (but  not 
including  interest  notes  or  coupons)  bears  across  the  face  and  text 
thereof  a  legend,  in  red  letters  not  less  than  one-half  inch  in  height 
stating  that  the  note  or  bond  is  a  construction  note  or  bond;  (c)  when 
the  mortgage  lien  is  a  junior  mortgage  upon  real  estate,  or  is  on  a  lease¬ 
hold  (other  than  oil,  gas  and  mining  leases)  and  the  aggregate  face 
value  of  such  mortgage  and  notes  or  bonds  secured  thereby,  together 
with  all  other  existing  prior  and  /  or  concurrent  liens  of  equal  or 
superior  rank,  (but  not  including  interest  notes  or  coupons)  does  not 
exceed  the  fair  market  cash  value  of  such  real  estate  or  leasehold,  pro¬ 
vided,  that  in  case  of  a  junior  mortgage  lien  on  real  estate  or  a  mortgage 
lien  on  a  leasehold  the  mortgage  and  notes  or  bonds  secured  thereby 
(but  not  including  interest  notes  or  coupons)  shall  each  bear  across  the 
face  and  text  thereof  a  legend  in  red  letters  not  less  than  one-half  inch 
in  height,  stating  (1)  that  the  mortgage  is  a  junior  mortgage,  if  that 
be  the  case,  and  (2)  that  the  mortgage  is  on  a  leasehold,  if  that  be  the 
case; 


5 


(8)  Being  a  note  secured  by  first  mortgage  upon  tangible  or  phy¬ 
sical  propert}^  Avhen  such  mortgage  is  assigned  with  sucli  securities 
to  the  purchaser; 

(9)  Evidencing  indebtedness  due  under  any  contract  made  in  pur¬ 
suance  to  the  provisions  of  any  statute  of  any  state  of  'the  United 
States  providing  for  the  acquisition  of  personal  property  under  con¬ 
ditional  sale  contract; 

(10)  Being  negotiable  promissory  notes  given  for  full  value  and 
for  the  sole  purpose  of  evidencing  or  extending  the  time  of  payment 
of  the  price  of  goods,  Avares  or  merchandise  purchased  by  the  issuer 
of  such  notes  in  the  ordinary  course  of  business,  and  commercial  paper 
or  other  evidence  of  indebtedness  running  not  more  than  twelve  months 
from  the  date  of  issue; 

(11)  Being  subscriptions  for  or  sales  of  shares  of  tJie  capital 
stock  of  a  corporation  prior  to  the  incorporation  thereof  under  the  laws 
of  the  State  of  Illinois,  tvJven  no  expense  is  incurred,  or  no  commission, 
compensation  or  remuneration  is  paid  ox  given  for  or  in  connectiori  ivith 
the  sale  or  disposition  of  such  securities; 

(12)  Bonds  or  notes  secured  by  lien  on  vessels  shown  by  policies 
of  marine  insurance  taken  out  in  responsible  companies  to  be  of  value, 
after  deducting  any  or  all  other  indebtexhiess  secured  by  pnor  lieri^  of 
7ioi  less  than  125%  of  the  par  amount  of  such  bonds  or  notes; 

Securities  in  Class  and  the  sales  thereof  shall  not  be  subject 
to  the  provisions  of  this  Act.  (As  amended  by  Act  approved  June  11, 
1921. 

§  5.  Securities  in  Class  being  exempted  sales,  shall  include: 

(1)  An  isoladed  sale  of  any  security  by  a  bona  fide  owner  tdiereof, 
or  his  representative,  for  the  owneEs  account,  such  sate  not  being  made 
in  the  course  of  repeated  and  successive  transactions  of  a  like  character, 
and  such  owner  not  being  a  broker  or  dealer  in  securities  or  an  under¬ 
writer  of  such  securities; 

(2)  Capital  stock  of  a  corporation  tvhen  sold  or  distributed  by  it 
among  its  stockholders  without  the  payment  of  any  commission  or  ex¬ 
penses  to  agents,  solicitors  or  brokers,  and  without  incurring  any  lia¬ 
bility  for  any  expenses  whatsoever,  in  connection  wdth  the  distribution 
thereof ; 

(3)  Securities  tvhen  sold  by  or  to  any  bank,  trust  company  or  in¬ 
surance  company  or  association  organized  under  the  banking  or  in¬ 
surance  laws  of  this  State  or  of  the  United  States,  or  doing  business 
in  this  State  under  the  supervision  of  the  Department  of  Trade  and 
Commerce;  or  of  the  Auditor  of  Public  Accounts;  or  by  or  to  any 
building  and  loan  association  organized  and  doing  business  under  tb.e 
laws  of  this  State,  or  any  public  sinking  fund  trustees; 

(4)  Securities  when  sold  to-  any  corporation,  or  any  broker  or 
dealer  in  securities; 

(5)  Securities  when  sold  or  offered  for  sale  at  any  judicial,  exe¬ 
cutors  or  administrators  sale,  or  at  any  sale  by  a  receiver  or  trustee 
in  insolvency  or  bankruptcy,  or  at  a  public  sale  by  auction  held  at  an 
advertised  time  and  place. 


Securities  when  disposed  of  by  the  persons  and  in  the  manner 
provided  by  this  section,  shall  not  be  subject  to  the  provisions  of  this 
Act  m  such  transactions j  provided,  however,  that  such  securities  shall 
not  he  resold,  except  as  is  in  this  section  provided,  without  compliance 
with  the  provisions  of  this  Act.  (As  amended  by  Act  approved  June 
11,  1921. 

§  0.  Securities  in  Class  shall  comprise  the  following: 

Those  issued  by  a  person,  corporation,  firm,  trust,  partnership  or 
association  owning  a  property,  business  or  industry  which  has  been 
in  continuous  operation  not  less  than  two  year^  /'jd  which  has  shown 
during  a  period  of  not  less  Jhan  two  years  ^mor  to  the  filing  of  the 
statement  herein  provided  for,  average  annual  net  profit?^  exclusive  of 
all  prior  charges,  as  follows: 

(1)  In  the  case  of  interest  bearing  securities,  not  less  than  one 
and  one-half  times  the  annual  interest  charge  thereon  and  upon  ail 
other  outstanding  interest  bearing  obligations  of  epial  rank; 

(2)  In  the  case  of  preferred  stock,  not  less  than  one  and  one- 
half  times  the  annual  dividend  on  such  preferred  stock  and  on,  all 
other  outstanding  stock  of  equal  rank; 

(3)  In  the  case  of  common  stock,  :iot  less  than  3%  per  annum 
upon  such  common  stock,  ( or  in  the  cr^se  of  common  stock  of  no  par 
value,  upon  the  price  at  which  the  srme  is,  or  is  to  he,  offered),  and 
on  all  other  outstanding  common  stork.  (As  amended  by  Act  approved 
June  11,  1921. 

§  7.  Securities  in  Class  ‘‘0^^  may  be  disposed  of,  sold  or  offered 
for  sale  upon  compliance  with  the  following  conditions,  and  not  other¬ 
wise  : 

(a)  A  statement  shall  be  filed  in  the  office  of  the  Secretary  of 
State : 

(1)  Describing  the  evidences  of  indebtedness,  preferred  stock  or 
common  stock  intended  to  be  offered  or  sold; 

(2)  Stating  the  law  under  which  and  the  time  when  the  issuer 
was  organized; 

(3)  CiviDg  a  detailed  statement  of  the  assets  and  liabilities  of 
such  issuer  and  income  or  profit  and  loss  statement,  and  giving  an 
analysis  of  surplus  account; 

(4)  Giving  the  names  and  addresses  of  its  principal  officers  and 
of  its  directors  or  trustees; 

(5)  Giving  pertinent  facts,  data,  and  information  establishing 
that  the  securities  to  be  offered  are  securities  in  Class 

Such  statement  shall  be  verified  bv  the  oath- of  not  less  than  two 
credible  persons  having  knowledge  of  the  facts.  Not  less  than  twenty- 
five  copies  of  such  statement,  wholly  printed  or  wholly  typewritten, 
shall  at  the  time  of  filing  the  original  statement  be  filed  with  the  Secre¬ 
tary  of  State.  The  printed  or  typewritten  copies  so  filed  shall  bear 
at  the  top  in  bold  faced  type  the  expression : 

^^Securities  in  Class  ^C’  under  Illinois  Securities  Law,’’  followed 
by  the  expression,  also  in  bold  faced  type : 

‘"^This  statement  is  prepared  by  parties  interested  in'  the  sale  of 
securities  herein  mentioned.  Neither  the  State  of  Illinois,  nor  any 


7 


officer  of  the  State,  assumes  any  responsibility  for  any  statement  con¬ 
tained  herein  nor  recommends  any  of  the  securities  described  below/^ 

(b)  By  and  ivitli  the  consent  and  approval  in  writing  of  the  Sec¬ 
retary  of  State  any  security  in  Class  ‘‘C  may  he  offered  for  sale  or 
sold  before  the  filing  of  the  statement  with  respect  thereto  herein  above 
in  Paragraph  (a)  of  this  section  seven  (7)  referred  to,  any  tiling  in  this 
statute  to  the  contrary  notwithstanding  such  consent  to  be  conditioned 
upon  there  being  deposited  in  the  office  of  the  Secretary  of  State  by  the 
issuer  or  any  party  interested  in  the  sale  of  such  security: 

1.  A  notice  briefly  describing  the  securities  to  be  offered  and 
stating  the  price  at  which  such  securities  are  to  be  offered  to  the  pub¬ 
lic,  the  amount  of  the  issue  and  the  amount  to  be  Isold  in  Illinois; 

2.  The  fee  with  respect  to  such  securities  prescribed-  in  section  26 
of  this  statute; 

3.  A  copy  of  the  circular  to  be  used  m  selling  or  offering  for  sale 
such  securities; 

4.  Such  additional  information  as  may  be  required'  by  the  Secre¬ 
tary  of  State;  provided  that  within  thirty  days  after  the  deposit  of 
such  documents,  or  ivithin  such  further  time  as  the  Secretary  of  State 
may  prescidbe,  there  shall  be  filed  in  the  office  of  the  Secretary  of  State 
the  statement  with  respect  to  such  securities  provided  for  in  Paragraph 
(a)  of  this  section  seven  (7);  and  further  provided,  that  no  issuer  o'!* 
other  party  shall  offer,  advertise  or  sell  any  such  security  prior  to  the 
filing  by  the  Secretary  of  State  of  the  statement  herein  above  in  Para¬ 
graph  (a)  prescribed  unless  such  issuer  or  other  party  shall  have  on  file 
in  the  office  of  the  Secretary  of  State  an  irrevocable  consent  and  power 
of  attorney  ivith  respect  to  the  sale  of  Glass  ‘‘C  securities  as  provided 
in  section  16  of  this  Act;  and  shall  also  have  on  file  in  the  office  of  the 
Secretary  of  State  a  good  and  sufficient  bond  in  the  sum  of  not  less  than 
$50,000.00,  payable  to  the  People  of  the  State  of  Illinois,  for  the  pro¬ 
tection,  use  and  benefit  of  purchasers  and  of  all  persons  in  interest, 
executed  by  a  surety  or  guaranty  company  authorized  to  do  b^isiness  in 
this  State  conditioned  that  in  the  event  the  staiement  ivith  respect  to 
any  securities  shall  not  be  filed,  as  above  provided,  the  obligor  in  such 
bond,  will  repay  to  any  purchaser  from  such  obligor,  on  demand  and 
tender  of  such  securities,  the  purchase  price  paid  therefor.  (As 
cimended  by  Act  approved  June  11,  1921. 

§  8.  All  securities  other  than  those  falling  within  Class 
and  respectively,  shall  be  known  as  securities  in  Class 

§  9.  2^0  security  in  Class  shall  be  sold  or  offered  for  sale 

until  there  shall  have  been  filed  in  the  office  of  the  Secretary  of  State, 
statements  and  documents  as  follows : 

(1)  A  description  and  amount  of  the  securities  intended  to  be 
offered  for  sale; 

/2)  If  the  issuer  is  a  corporation,  a  certified  copy  oi  the  charter 
or  articles  of  incorporation  and  by-laws ; 

(3)  If  the  issuer  is  a  firm,  trust,  partnership  or  unincorporated 
association,  a  copy  of  the  articles  of  partnership,  association  or  trust 
agreement ; 


8 


(4)  The  names,  addresses  and  prior  occupations  during  a  period 
of  not  less  than  ten  (10)  years  prior  to  filing  such  statement  (giving- 
details  as  to  time,  place  and  address  of  employer  and  reasons  for  dis¬ 
continuance  of  employment)  of  the  officers,  directors  or  trustees  of  the 
issuer,  if  it  be  a  corporation,  or  of  the  persons  composing  the  issuer,  if 
the  issuer  be  a  non-incorporated  association; 

(5)  A  description  of  the  nature  of  the  industry  engaged  in  or  in¬ 
tended  to  be  engaged  in  and  tlie  approximate  time  when  such  industry 
was  or  will  be  established; 

(6)  An  inventory  showing  the  assets  of  the  issuer; 

(7)  An  appraisement  of  the  assets  of  the  issuer; 

(8)  A  statement  in  detail  of  the  gross  income  of  the  issuer  and 
the  source  or  sources  thereof  and  of  its  operating  and  -other  expenses 
for  a  period  of  twelve  (12)  months  prior  to  the  date  of  filing  sucli 
statement,  or  for  the  period  of  the  existence  of  the  issuer  if  less  than 
two  years  prior  to  the  date  of  filing ; 

(9)  A  copy  of  the  most  recent  balance  sheet  of  the  issuer,  show¬ 
ing  the  financial  condition  of  the  issuer  at  a  date  not  more  than  thirtv 
(30)  days  prior  to  the  date  of  filing,  and  giving  an  analysis  of  surplus 
account  from  inception  of  such  issuer  ; 

(10)  A  copy  of  the  mortgage,  trust  deed,  indenture  or  writing 
securing  the  securities,  [or]  whereunder  the  same  are  issued,  if  any 
such  instrument  there  be ; 

(11)  A  copy  of  the  form  of  the  securities  intended  to  be  offered; 

(12)  A  copy  of  any  and  all  subscription  blanks  to  be  used  in  the 
sale  thereof,  which  subscription  blanks  shall  have  printed  thereon, 
^‘These  are  speculative  securities^k 

(13)  A  statement  as  to  the  manner  in  which  the  securities  are  to 
be  offered  and  sold; 

(14)  If  the  securities  be  intended  to  be  offered  and  sold  by  the 
issuer  through  solicitors,  agents  or  brokers,  an  irrevocable  contract 
executed  by  each  such  solicitor,  agent  or  broker  authorized  to  offer  or 
sell  such  securities  bv  or  on  behalf  of  the  issuer  to  the  effect  that  the 

xJ 

issuer  will  receive  in  cash  not  less  than  80%  of  the  proceeds  of  each 
sale  of  the  securities  without  deduction  for  any  commission  .or  ex¬ 
penses,  directly  or  indirectly,  and  without  liability  to  pay  any  sum 
whatsoever  as  commission  or  expenses  or  for  services  in  and  about 
such  sale; 

If  the  securities  shall  have  been  or  be  intended  to  be-  sold  to  any 
dealer,  solicitor,  agent  or  broker  and  intended  to  be  by  such  dealer, 
solicitor,  agent  or  broker  sold  to  the  public  for  their  own  account,  a 
statement  verified  under  oath,  establishing  that  the  price  paid  to  the 
issuer  was  or  will  be  without  any  fixed  or  contingent  right  in  the  issuer 
to  demand  or  receive  any  additional  sum  on  account  of  such  securities 
or  the  sale  thereof  ; 

(15)  A  summary  of  the  material  facts  disclosed  by  the  preceding 
statements ; 

(IG)  Such  other  facts  relative  to  such  securities  as  the  Secretary 
of  State  shall  prescribe. 


9 


Such  statements  and  documents  shall;,  except  as  otherwise  pro¬ 
vided  herein  be  verified  by  the  oath  of  not  less  than  two  oi  the  officers 
of  the  issuer;,  if  the  issuer  be  a  corporation^  or  by  not  less  than  two 
members  of  a  firm^  trust;,  partnership  or  association;,  if  the  issuer  be 
non-incorporated. 

The  Secretary  of  State  may  require  further  and  additional  veri¬ 
fication  under  the  oaths  of  other  persons.  % 

§  10.  With  the  statement  required  to  be  filed  in  the  office  of  the 
Secretarv  of  State  with  reference  to  securities  in  Class  there 

shall  also  be  filed  an  inventory,  in  such  detail  as  the  Secretary  of  State 
shall  require;  showing  the  assets  of  the  issuer  as  of  a  date  not  more 
than  thirty  (30)  days  prior  to  the  date  of  filing  thereof.  Such  inven¬ 
tory  shall  be  accompanied  by  an  appraisement  made  by  a  disinterested 
qualified  person  or  persons  who  may  he  selected  hy  the  Secretary  of 
State,  showing  the  value  of  the  assets  described  in  such  inventory. 
The  person  or  persons  making  such  appraisement  shall  state  in  such 
appraisement  the  character  and  nature  of  their  experience  and  their 
qualifications  to  value  such  property  and  all  the  facts  or  considerations 
on  the  basis  of  which  their  estimate  of  values  is  predicated. 

Such  appraisement  shall  be  verified  by  the  oath  of  the  person  or 
persons  making  the  same.  (As  amended  by  Act  approved  June  11, 
1921. 

§  11.  At  any  time,  either  before  or  after  the  filing  of  any  state¬ 
ment  required  by  this  Act  to  be  filed  with  reference  to  securities  in 
Class  or  Class  the  Secretary  of  State  ma}^  designate  a  certified 
public  accountant  to  make  an  examination  of  the  books,  records, 
papers  and  documents,  of  the  issuer  and  make  a  report  of  the  exam¬ 
ination  thereof  to  the  Secretarv  of  State.  The  Secretarv  of  State  shall 

K/  Kf 

fix  the  compensation  of  such  certified  public  accountant  in  advance  and 
shall  notify  the  issuer  thereof  of  the  amount  so  fixed,  which  compensa¬ 
tion  shall  be  paid  by  the  issuer  to  such  certified  public  accountant  as 
his  compensation  for  making  such  examination. 

The  Secretary  of  State  may  secure  information  from  or  through 
others  and  may  malce  or  cause  to  he ^  made  investigations  respecting 
the  business,  affairs  and  property  of  the  issuer,  and  in  financing  hy 
the  sale  of  securities  in  Class  the  Secretary  of  Stale  in  his  dis¬ 
cretion  may  require  that  the  capital  to  he  ohtained  hy  such  sales,  he 
held  intact  until  the  completion  of  the  sale  of  securities,  or  so  much 
or  such  portion  of  the  issue  to  he  sold  as  may  in  the  opinion  of  the 
Secretary  of  State  prevent  loss  of  such  capital  or  fraud  upon  the  pur¬ 
chasers  of  such  securities,  and  for  such  purpose  talce  bond  to  the 
People  of  the  State  of  Illinois  for  the  use  and  heneft  of  such  purchasers 
with  sufficient  sureties,  or  may  accept  other  safeguards  in  lieu  thereof; 
and  may  require  financial  statements  and  reports  of  the  issuer  so  often 
as  circumstances  appear  to  'warrant.  (As  amended  by  Act  a])provcd 
June  11,  1921. 

§  12.  If  the  statement  as  to  securities  in  Class  shall  disclose 
that  any  of  such  securities  shall  have  been  or  shall  be  intended  to  be 
issued  for  any  patent  right,  copyright,  trade-mark,  process  or  good 
will,  or  for  promotion  fees  or  expenses,  or  for  otlier  intangible  assets, 


10 


the  amount  and  nature  tliereof,  shall  be  fully  set  forth,  and  securities 
issued  in  payment  of  such  patent  right,  copyright,  trade-mark,  process 
or  good  will,  or  for  promotion  fees  or  expenses,  or  for  other  intangible 
assets,  shall  be  delivered  in  escrow  to  such  bank  or  trust  company  as 
shall  be  designated  by  the  Secretary  of  State  under  an  escrow  agree¬ 
ment  that  the  owners  of  such  securities  shall  in  case  of  dissolution  or 
insolvency  not  participate  in  the  assets  of  the  corporation  until  after 
the  owners  'of  all  other  securities  have  been  paid  in  full.  Such  escrow 
agreement  shall  remain  in  full  force  until  the  securities  of  the  issuer 
thereof  are  qualified  under  Class  hereof. 

§  13.  If  the  statement  as  to  securities  in  Class  “D’’  discloses  that 
such  securities  are  intended  to  be  offered  or  sold  by  the  issuer,  through 
a  solicitor,  agent  or  broker,  a  statement  giving  the  names,  residences, 
qualifications,  occupations  and  business  experience  of  such  solicitor, 
agent  or  broker  for  a  period  of  ten  years  prior  to  the  filing,  and  the 
name  and  address  of  each  employer,  the  period  of  employment  and 
reason  for  resignation  or  discharge,  shall  be  filed  in  the  office  of  the 
Secretary  of  State.  The  signatures  of  each  and  every  of  such  solicitors, 
agents  or  brokers,  shall  be  attached  to  such  statement.  If  after  the 
filing  of  such  statement  the  issuer  shall  appoint  any  additional  solicitor, 
agent  or  broker  to  offer  or  sell  such  securities  before  any  such  addi¬ 
tional  solicitor,  agent  or  broker,  shall  offer  or  sell  any  such  securities, 
there  shall  be  filed  like  statements. 

§  14.  After  qualification  of  securities  in  Class  by  the  issuer, 
ain^  dealer  or  owner  may  sell  such  securities  upon  filing  in  the  office  of 
the  Secretary  of  State,  a  statement  verified  b}'’  the  oath  of  such  dealer 
or  owjier  as  otherwise  provided  by  this  Act,  a  statement  of  the  amouni; 
and  description  of  the  securities  to  be  sold  by  him  or  it,  the  maximum 
pi'ice  for  which  they  are  to  be  sold,  his  or  its  address  by  street  and 
number,  qualification,  occupation,  and  business  experience  of  such 
dealer  or  owner  for  a  period  of  ten  years  prior  to  filing  such  .statement, 
giving  name  and  address  of  each  employer,  tire  period  of  emplo3nnont 
and  the  reason  for  resignation  or  discharge. 

§  15.  ^^'ot  less  than  25  printed  or  typewritten  copies  of  the  sum¬ 

mary  of  the  statement  required-  to  be  filled  with  reference  to  securities 
in  Class  shall  be  deposited  in  the  office  of  the  Secretary  of  State. 
The  printed  or  typewritten  copies  so  deposited  shall  bear  at  the  top  in 
bold  face  type  the  expression : 

‘^Securities  in  Class  Tl’  under  Illinois  Securities  Law:  These  are 
speculative  securities,^’  followed  by  the  expression,  also  in  bold  face 
type : 

‘‘This  statement  is  prepared  by  parties  interested  in  the  sale  of 
securities  herein  mentioned.  iMeither  the  State  of  Illinois  nor  any 
officer  of  the  State  assumes  anv  responsibilitv  for  any  statement  con- 
tained  herein  nor  recommends  any  of  the  securities  described  below.” 

§  16.  Before  any  securities  in  Classes  ^^C”  or  “D”  shall  be  sold 
or  offered  for  sale  the  issuer  or  person  intending  to  sell  or  offer  for 
sale  such  securities  shall  file  in  the  office  of  the  Secretarv  of  State  a 
written  irrevocable  consent  and  power-of-attorne}^  that  suits  at  law  or 
in  equit}'  arising  out  of  or  founded  upon  the  sale  or  offering  for  sale 


11 


of  any  of  such  securities  may  he  commenced  against  the  corporation  or 
person  executing  such  power-of -attorney  in  any  court  of  competent 
jurisdiction  within  this  State,  in  any  county  in  which  the  plaintilf  or 
complainant  resides,  or  in  which  tlie  cause  of  action  may  have  arisen, 
by  the  service  of  process  upon  the  Secretary  of  State,  and  therein 
agreeing  and  stipulating  that  such  service  of  process  upon  the  Secre¬ 
tary  of  State  shall  be  taken  and  held  in  all  courts  to  be  as  valid  and 
binding,  as  if  due  service  had  been  made  upon  the  corporation  or  per¬ 
son  executing  such  power-of-attorney,  according  to  the  law  of  this  State. 
Such  instrument  if  the  owner  be  a  corporation^  shall  be  signed  by  its 
chief  executive  and  chief  recording  officer  under  its  corporate  seal,  if  it 
have  [has]  one,  pursuant  to  a  resolution  of  its  governing  body,  a  certi- 
led  copy  of  which  resolution  shall  be  attached  to  such  irrevocable  con¬ 
sent  and  power-of-attorney,  or  if  a  person  or  a  non-incorporated 
association  then  signed  and  acknowledged  by  such  person  or  by  all  the 
members  of  such  non-incorporated  association.  Whenever  any  process 
is  served  upon  the  Secretary  of  State,  he  shall  at  once  forward  a  copy 
of  the  same  by  registered  mail  to  the  defendant  at  liis  or  its  last  address 
of  record  in  the  office  of  the  Secretary  of  State. 

§  17.  Before  tiling  any  statement  or  document  with  reference  to 
securities  in  Class  or  Class  the  Secretary  of  State  shall  within 
a  reasonable  time  examine  the  same  and,  if  the  same  is  incomplete, 
inadequate,  evasive  or  otherwise  not  in  conformity  with  the  provisions 
of  this  Act,  or  if  the  sale  or  offering  for  sale  of  securities  based  upon 
the  plan  or  scheme  evidenced  by  the  statements  and  documents  offered 
to  be  filed,  would  in  the  opinion  of  the  Secretary  of  State  work  or  tend 
to  wmrk  a  fraud  upon  the  purchaser  of  such  securities  the  Secretary 
of  State  shall  refuse  to  file  the  same.  Otherwise  such  statements  or 
documents  shall  be  filed  by  the  Secretary  of  State.  Upon  the  filing  of 
such  statements  or  documents  by  the  Secretary  of  State,  the  issuer, 
solicitor,  agent,  broker,  dealer  or  owner  may  proceed  to  sell  the  amount 
of  securities  proposed  to  be  sold  or  disposed  of  in  this  State,  but  no 
written  or  printed  evidence  of  the  compliance  with  this  Act  shall  be 
issued  by  the  Secretary  of  State.  The  Secretary  of  State  may,  either 
before  or  after  such  statements  and  documents  are  filed,  propound  in¬ 
terrogatories  to  the  persons  filing,  or  offering  to  file^  such  statements  or 
documents,  respecting  any  facts  required  to  be  stated  with  reference 
to  such  securities.  Such  interrogatories  shall  be  answered  under  oath. 
If  such  interrogatories  relate  to  a  statement  or  document  offered  to  be 
filed,  such  statement  or  document  shall  not  be  filed  until  such  iiiterro- 
gatoi’ies  are  answered,  and  not  then  unless  such  statement  and  docu¬ 
ment  and  the  answers  to  such  interrogatories  disclose  conformity  with 
this  Act.  If  such  interrogatories  relate  to  a  statement  or  document 
already  filed,  such  interrogatories  shall  be  answered  within  twenty 
days  or  within  such  further  time  as  the  Secretary  of  State  shall  pre¬ 
scribe.  If  not  answered  within  twenty  days  or  witliin  any  extension 
thereof,  the  sale  or  offering  for  sale  of  the  securities  coveied  by  tlie 
statement  or  document  to  which  the  interrogatories  relate,  shall  be 
unlawful. 


12 


§  .18.  Whenever  the  Secj'etary  of  State  refuses  to  file  any  state-  '  * 
nient  or  document  presented  under  the  provisions  of  this  Act,  the 
person  presenting  such  statement  or  documents  for  filing  ma\'  within 
thirty  da3^s  thereafter,  file  a  petition  in  the  Circuit  Court  of  Sanga-  ^ 
mon  County,  against  the  Secretary  of  State,  officially  as  defendant, 
to  review  his  action  in  refusing  to  file  such  statement  or  document, 
alleging  therein,  under* oath,  in  brief  detail,  the  right  of  the  petitio-ner 
to  sell  securities  in  this  State,  and  praying  that  the  Secretary  of  State 
be  required  to  file  in  his  office  such  statement  or  document. 

If,  upon  a  hearing,  the  court  shall  find  upon  consideration  of  the 
slatement  or  document  and  other  pertinent  evidence  that  the  sale  or 
offering  for  sale  of  securities  upon  the  basis,  plan  or  scheme  evidenced 
therein  and  thereby  will  not  work  or  tend  to  work  a  fraud  upon  the 
purchaser  or  purchasers  of  such  securities,  and  shall  further  find  that 
the  Secretary  of  State  wrongfully  concluded  that  the  sale  or  offering 
for  sale  of  such  securities  would  ivork  or  tend  to  work  a  fraud  upon 
purchasers  thereof,  and  that  the  petitioner  is  entitled  to  the  benefits 
of  and  has  complied  with  the  provisions  of  this  Act,  the  couit  may 
order  such  statement  or  document  filed. 

Either  party  to  such  suit  shall  have  the  right  to  prosecute  an  ap¬ 
peal  from  the  order  or  judgment  of  the  court.  Judgment  against  the 
petitioner  shall  not  bar  his  right  to  file  a  new  statement  or  document 
under  the  provisions  of  this  Act,  nor  shall  judgment  in  favor  of  the 
petitioner  prevent  the  Secretary  of  State  from  thereafter  applying  for  an 
injunction,  or  otherwise  proceeding,  as  is  provided  in  this  Act.  ^Merely 
technical  irregularities  in  the  procedure  of  the  Secretary  of  State  shall 
be  disregarded  and  the  burden  of  proof  on  all  questions  in  controversy 
shall  rest  upon  the  petitioner.  (As  amended  by  Act  approved  June  11. 

1921. 

§  19.  Every  expression  or  statement  made  as  an  inducement  to 
])rocure  the  filing  of  the  information  required  by  the  provisions  of  this 
Act,  either  concerning  Class  ^^C^^  or  Class  securities,  shall  be  re¬ 
duced  to  writing  and  verified  under  oath  Iw  the  person  making  such 
expression  or  statement. 

§  20.  So  long  as  any  security  is  sold  or  offered  for  sale  under  the 
provisions  of  this  Act,  such  person,  issuer,  dealer,  solicitor,  agent  or 
broker  shall  on  or  before  the  expiration  of  each  six  months’  period, 
from  the  date  of  filing  the  original  statements  and  documents,  and 
of  teller  if  required  by  the  Secretary  of  State,  file  new  or  supplemental 
statements  disclosing : 

(1)  The  amount  of  securities  sold,  the  sale  price  thereof  and  the 
amount  of  cash  proceeds  received  therefor  by  the  issuer; 

(2)  All  changes  in  the  financial  conditions  of  the  issuer  or  in  its 
management  or  property,  accompanied  by  a  copy  of  the  most  recent 
balance  sheet  of  the  issuer  showing  the  financial  condition  of  the  issuer 
at  a  date  not  more  than  30  days  prior  to  the  date  of  such  filing,  and 
such  other  facts  as  the  Secretary  of  State  may  require. 

Such  supplemental  statement  shall  also  be  accompanied  by  not 
less  than  twenty-five  wholly  typewritten  or  printed  copies  of  such  sum- 


13 


mary  of  such  supplemental  statement,  which  summary  shall  be  tiled 
in  the  office  of  the  Secretary  of  State. 

.  Such  supplemental  statement  shall  be  verified  in  the  same  manner 
as  the  original  statement. 

§  21.  Each  financial  statement,  prospectus,  advertisement,  circular 
and  document  circulated,  published  or  distributed  for  the  purpose  of 
effecting  sales  of  securities  in  Class  shall  contain  the  words,  in 

boid  faced  type,  ^^Securities  in  Class  under  Illinois  Securities  Law. 
These  are  speculative  securities.^’  But  it  shall  be  unlawful  to  make 
any  other  reference  in  any  such  matter  to  the  fact  that  the  issuer, 
solicitor,  agent  or  broker  has  complied  with  the  provisions  of  this  Act. 
All  such  matter  shall  also  contain  a  statement  of  the  assets,  liabilities, 
income  and  expenses  of  the  issuer,  the  law  under  which  the  issuer  was 
incorporated  or  organized,  and  the  names  and  addresses  of  all  officers, 
directors  or  trustees,  of  the  issuer  or  of  the  owner  of  the  property  con¬ 
stituting  the  basis  of  the  issue  of  such  securities.  A  copy  of  each  such 
financial  statement,  prospectus,  advertisement,  circular  and  document 
so  circulated,  published  or  distributed  shall  be  filed  in  the  office  of  the 
Secretary  of  State  within  ten  (10)  days  after  the  first  circulation, 
publication  or  distribution  thereof.  It  shall  be  unlawful  to  print,  pub¬ 
lish,  circulate  or  distribute  such  matter  showing  the  earnings  of  other 
companies  or  corporations  engaged  in  a  similar  business. 

It  shall  be  unlawful  for  any  issuer,  solicitor,  agent  or  broker  in 
any  advertisement  intended  to  promote  the  sale  of  securities  in  Class 

to  make  any  reference  whatsoever  to  the  fact  that  such  issuer, 
solicitor,  agent  or  broker  has  complied  with  the  provisions  of  this  Act. 

§  22.  The  Secretary  of  State  shall,  upon  request  therefor,  mail  or 
deliver  to  any  person  a  copy  of  the  summary  of  the  statements  or  supple¬ 
mental  statements  required  to  be  deposited  in  his  office. 

§  23.  The  Secretary  of  State  may  prescribe  and  furnish  forms  for 
all  statements  and  documents  and  summaries  required  by  this  Act  to 
be  filed  in  his  office  and  such  statements,  documents  and  summaries 
shall  follow  substantially  the  forms  so  prescribed. 

§  24.  (1)  In  case  any  statement  or  document  submitted  or  filed 

in  the  office  of  the  Secretary  of  State  shall,  in  the  judgment  of  the 
Secretary  of  State,  in  any  material  part  thereof  be  inadequate,  in¬ 
sufficient  or  not  in  compliance  with  this  Act,  or  in  case  the  basi^,  plan 
or  scheme  disclosed  by  such  statements  or  documents,  adopted  or  filed, 
would,  in  the  judgment  of  the  Secretary  of  State,  work  or  tend  to  work 
a  fraud  upon  purchases,  or  if  it  shall  be  made  to  appear  to  the  Secretary 
of  State,  by  complaint,  through  investigation  or  otherwise,  that  the 
statements  and  documents  filed  with  respect  to  any  securities  are  false 
or  deceptive  in  any  material  particular,  or  if  it  shall  be  made  to  appear 
to  the  Secretary  of  State  that  insolvency  erists  or  that  conditions  with 
respect  to  any  such  securities  have  so  changed  that  the  further  sale  or 
offering  for  sale  thereof  would  ivorh  or  tend  to  irorlc  a  fraud  on  pur¬ 
chasers  thereof,  or  that  any  of  the  terms  and  provisions  of  this  Act,  have 
not  been  complied  with,  or  if  it  shall  appear  .to  the  Secrelary  of  State 
by  complaint,  upon  investigation  or  otherivise,  that  an}!  securities  have 
been  sold  or  are  being  offered  for  sale  ivithout  compliance  iciih ,  or  in 
violation  of  any  of  the  provisions  of  this  Act,  the  Secretary  of  State 


14 


shal],  in  the  name  of  tlie  TeopJe  of  the  State  of  Illinois,  through  the 
Attorney  General,  apply  for  an  injunction  in  any  court  of  com}>etent 
jurisdiction  to  restrain  the  further  sale  or  offering  for  sale  of  such 
securities;  and  (he  cowi  shall  have  potaer  to  restram  the  sale  or  offering 
for  sale  of  such  securities  upon  such  application  and  may  grant  injunc-. 
tions  to  enforce  the  provisions  of  this  Act,  in  addition  to  the  penalties 
and  other  remedies  in  this  Act  provided;  the  pelitioner  shall  not  he 
required  to  give  bond  in  such  proceedings  and  eitlher  party  to  such  suit 
shall  have  the  right  to  prosecute  an  appeal  from  th^e  order  or  judgment 
of  the  court. 

(2)  The  Secretary  of  State  shall  also  have  the  power  at  any  time, 
after  five  days  notice  to  the  seller  of  securities,  ivhen  insolvency  exists  or 
tvhen  in  the  opinion  of  the  Secretary  of  State'  the  further  sale  of  such 
securities  would  luorh  or  tend  to  ivorlc  a  fraud  upon  purchasers  thereof, 
to  suspend  or  cancel  permission  to  sell  such  securities  in  this  State,  and 
thereafter  the  sale  or  offer  for  sale  of  such  securities  shall  he  unlaivful, 
and  may  rescind  such  action  when  it  shall  he  made  to  appear  that  further 
sales  of  such  securities  will  not  ivorlc  or  tend  to  work  fraud  upon  pur¬ 
chasers,  the  order  suspending  or  cancelling  such  authority  to  sell  securi¬ 
ties  and  any  recision  thereof  shall  he  reduced  to  writing  and  signed  hy 
the  Secretary  of  State;  any  issuer,  corporation  or  person  aggrieved  or 
interested  in  any  such  suspension  or  cancellation  order  aforesaid  shall 
have  the  right  to  have  the  action  and  decision  of  the  Secretary  of  State 
revieived  hy  the  Circuit  Court  of  Sangamon  County,  the  procedure  and 
rights  under  this  paragraph  two  (2)  of  this  section  shall  he  governed  hy 
the  provisions  of  section  18  of  this  Act  in  so  far  as  such  provisions  may 
he  applied. 

(3)  In  no  case  shall  the  Secretary  of  State  incur  any  official  or 
personal  liahility  hy  instituting  injunction  or  other  proceedings,  or  hy 
the  suspension  or  cancellation  of  the  right  or  authority  to  sell  securities. 
(As  amended  by  Act  approved  June  11,  1921. 

§  25.  All  statements  and  documents  and  all  other  matters  filed 
in  the  office  of  the  Secretary  of  State  under  the  provisions  of  this  Act 
shall  at  all  proper  hours  he  available  for  public  inspection. 

§  26.  Before  filing  any  statements  required  to  be  filed  liereunder 
with  reference  to  securities  in  Class  ‘^C’^  or  in  Class  the  person 
so  filing  such  statements  shall  pay  in  advance  to  the  Secretary  of  State 
a  fee  of  one-twentieth  of  one  per  cent  of  the  amount  of  the  securities 
to  be  offered  for  sale  in  this  State,  but  in  no  case  shall  the  fee  be  less 
than  twenty-five  dollars  ($25.00)  or  more  than  three  hundred  dollars 
($300.00). 

§  27.  All  oaths  required  by  this  Act  relating  to  securities  in  Class 
shall  be  taken  before  an  officer  of  this  State,  authorized  to  ad¬ 
minister  oaths  therein. 

§  28.  Whenever  in  this  Act  copies  of  statements  or  other  docu¬ 
ments  are  required  to  be  furnished  to  the  Secretary  of  State  for  dis¬ 
tribution,  additional  copies  as  requested  by  the  Secretary  of  State, 
shall  be  supplied  by  the  parties  filing  the  original  copies  or  by  parties 
interested  in  the  disposition  of  such  securities. 


§  29.  Any  solicitor,  agent  or  broker,  selling  or  offering  to  sell  any 
securities  in  Class  without  compliance  with  the  provisions  of  this 
Act,  shall  be  deemed  guilty  of  a  misdemeanor  and  upon  conviction 
thereof,  shall  be  punished  by  a  fine  of  not  less  than  one  hundred  dol¬ 
lars  ($100.00),  and  not  more  than  five  thousand  dollars  ($5,000.00) 
for  the  first  offense  and  not  less  than  one  thousand  dollars  ($1,000.00), 
nor  more  than  ten  thousand  dollars  ($10,000.00)  for  the  second  or  any 
subsequent  offense,  or  by  imprisonment  in  the  county  jail  not  more 
than  one  year  or  may  be  punished  by  both  such  fine  and  imprisonment, 
in  the  discretion  of  the  court. 

§  30.  Any  issuer  of  securities  or  any  officer,  director,  trustee  or 
agent  thereof,  selling  or  offering  to  sell  any  securities  in  Class 
without  full  compliance  with  the  provisions  of  this  Act,  shall  be 
deemed  guilty  of  a  misdemeanor  and  upon  conviction  thereof  shall  be 
fined  in  any  sum  not  exceeding  ten  thousand  dollars  ($10,000.00)  for 
the  first  offense  and  not  to  exceed  twent,y-five  thousand  dollars 
($25,000.00)  for  the  second  or  any  subsequent  offense,  and  the  officer, 
director,  trustee  or  agent  thereof,  or  the  issuer  (if  a  natural  person) 
may  be  punished  by  imprisonment  in  the  county  jail  not  exceeding  one 
year  or  may  be  punished  by  both  such  fine  and  imprisonment,  in  the 
discretion  of  the  court. 

§  31.  Any  person  or  corporation,  whether  acting  on  his  or  its 
own  behalf  or  on  behalf  of  another  violating  any  of  the  provisions 
of  this  Act,  shall  be  deemed  guilty  of  a  misdemeanor  and  on  con¬ 
viction  thereof  shall  be  fined  not  less  than  one  hundred  dollars 
($100.00)  nor  more  than  five  hundred  dollars  ($500.00)  for  the  first 
offense  and  not  less  than  five  hundred  dollars  ($500.00),  nor  more 
than  one  thousand  dollars  ($1,000.00)  for  the  second  or  any  subse¬ 
quent  offense,  or  imprisonment  in  the  county  jail  for  not  more  than 
six  months  for  the  first  offense  nor  more  than  one  year  for  the  second 
or  any  subsequent  offense,  or  shall  be  subject  to  both  such  fine  and 
imprisonment,  in  the  discretion  of  the  court. 

§  32.  Any  dealer,  agent,  solicitor  or  broker,  who  shall  make  any 
statement  or  representation  not  authorized  by  the  issuer,  or  any  state¬ 
ment  or  representation  at  variance  with,  or  not  reasonably  predicated 
upon  the  statements  and  documents  filed  by  the  issuer  in  the  office  of 
the  Secretary  of  State,  ^shall  be  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof,  shall  be  fined  in  any  sum  not  to  exceed  one  thousand 
dollars  ($1,000.00)  for  the  first  offense,  and  not  to  exceed  five  thou¬ 
sand  dollars  ($5,000.00)  for  the  second  or  any  subsequent  offense,  or 
imprisoned  in  the  county  jail  not  more  than  six  months  for  the  first 
offense,  nor  more  than  one  year  for  the  second  or  any  subsequent  offense, 
or  shall  be  subject  to  both  such  fine  and  imprisonment,  in  the  discretion 
of  the  court. 

§  33.  Any  person  signing  any  statement,  list,  inventory,  balance 
sheet  or  other  paper  or  document  required  by  any  provision  of  this 
Act  to  be  verified  or  sworn  to,  knowing  any  representation  therein 
contained  to  be  false  or  untrue  (and  the  depositing  of  any  such  state¬ 
ment  or  document  in  the  office  of  the  Secretary  of  State  shall  be  deemed 
prirna  fade  evidence  of  knowledge  of  the  falsity  thereof  or  of  any  repre- 


16 


sentation  tlierein  contained,  and  of  the  wilful  signing  of  such  statement 
or  document)^  shall  be  deemed  guilty  of  perjury  and  shall  be  subject 
to  the  penalties  by  the  law  of  this  State  prescribed  therefor. 

§  34.  It  shall  be  unlawful  for  any  officer,  director,  trustee, 
solicitor,  agent  or  broker  of  or  for  any  issuer,  knowing  such  issuer 
to  be  insolvent,  to  sell  anv  securities  issued  bv  such  issuer;  and  anv 
such  officer,  director,  trustee,  solicitor,  agent  or  broker  who  shall  make 
any  sale  of  any  securities  ot'  and  for  any  such  issuer,  and  by  reason 
of  such  insolvency  of  such  issuer,  the  price  paid  for  such  securities 
or  any  part  thereof  shall  be  lost  to  the  purchaser,  shall  be  deemed, 
guilty  of  embezzlement  and  upon  conviction  thereof  shall  be  fined  in 
a  sum  not  less  than  one  thousand  dollars  ($1,000.00)  nor  more  than 
ten  thousand  dollars  ($10,000.00)  or  may  be  imprisoned  in  the  State 
penitentiary  for  not  less  than  one  vear  nor  more  than  five  vears.  or 

X.  %J  «y‘  %j  y 

may  be  both  fined  and  imprisoned,  in  the  discretion  of  the  court. 
For  the  purpose  of  this  section,  an  issuer  shall  be  deemed  insolvent 
whenever  the  aggregate  of  its  property  shall  not,  at  a  fair  valuation, 
be  sufficient  in  amount  to  pay  its  debts. 

§  35.  Any  person  interested  in  sepurities  in  Class  may  main¬ 
tain  in  the  name  of  the  issuer  an  action  at  law  or  suit  in  chancerv 

•/ 

for  the  use  of  the  issuer,  against  the  solicitor,  agent  or  broker  of  such 
issuer,  jointly  or  severally,  to  recover  of  such  solicitor,  agent  or  broker 
all  moneys  in  excess  of  20%  of  the  proceeds  of  the  sales  of  securities 
made  by  such  solicitor,  agent  or  broker  and  not  turned  into  the  treasury 
of  the  issuer. 

§  36.  It  shall  be  unlawful -for  any  officer,  director,  solicitor,  broker 
or  agent,  to  sell  or  offer  for  sale  any  securities  in  Class  in  any 

other  manner  or  form  than  specifically  set  forth  in  the  information 
recjuired  to  be  filed  in  section  9  of  this  Act,  and  any  offer  or  sale  upon 
any  other  terms  or  conditions  other  than  set  forth,  shall  be  considered 
prima  facie  evidence  that  such  officer,  director,  trustee,  solicitor  or 
agent  offered  or  sold  same  for  the  purpose  of  defrauding  the  investor 
to  whom  such  Security  was  offered  or  sold. 

§  3T.  (1)  Every  sale  and  contract  of  sale  made  in  violation  of 

an}^  of  the  provisions  of  this  Act  shall  be  void  at  the  election  of  the 
purchaser,  and  the  seller  of  the  securities  so  sold,  the  offi-cers  and 
directors  of  the  seller,  and  each  and  every  solicitor,  agent  or  broker 
of  or  for  such  seller,  who  shall  have  knoAvingly  performed,  any  act 
or  in  any  way  furthered  such  sale,  shall  be  jointly  and  severally  liable, 
in  an  action  at  law  or  m  equity,  upon  tender  to  the  seller  or  in  court 
of  the  securities  sold,  to  the  purchaser  for  the  amount  paid,  the  con¬ 
sideration  given  or  the  value  thereof,  together  with  his  reasonable 
attorney’s  fees  in  any  action  brought  for  such  recovery. 

(2)  In  any  action,  civil  or  criminal,  nliere  the  seller  or  issuer  re¬ 
lies  for  his  defense  upon  any  of  the  exemptions  provided  for  in\  this 
Act,  the  burden  of  proof  to  establish  such  exemption,  shall  be  upon 
such  issuer  or  seller. 

(3)  The  Secretary  of  State  shall  have  the  pou'cr  to  male  such 
investigations  under  this  Act  as  he  may  deem  proper  and  expedient, 
and  to  refer  any  complaint,  together  with  information  relative  thereto. 


17 


to  the  proper  officers  of  the  coiuitij  in  ivhich  any  violation  may  have 
occurred. 

(Jf)  For  the  purposes  of  this  Act  all  persons,  soliciiors,  agents, 
hrolcers,  officers  and  directors  of  the  seller,  irho  shall  sell  or  offer  for 
sale  securities  in  violation  of  the  provisions  of  this  Act,  or  ivho  shall  in 
any  manner  authorize,  aid  or  ass'ist  in  any  nnlawful  sale  or  offering  for 
sale,  shall  he  deemed  equally  guilty,  and  may  he  tried  and  punished  in 
the  county  in  which  said  unlawful  sale  or  offering  for  sale  was  made, 
or  in  the  county  in  ivliich  the  securities  so  sold  or  offered  for  sale,  ivere 
delivered  or  proposed  to  he  delivered  to  the  purchaser  thereof. 

(5)  In  any  prosecuiion,  action,  suit  or  proceeding  hefore  any  of 
the  several  courts  of  this  State  based  upon  or  arising  out  of  or  under 
the  provisions  of  this  Act,  a  certificate  under  the  seal!  of  State,  duly 
signed  hy  the  Secretary  of  State,  showing  compliance  or  non-compliance 
ivith  the  provisions  of  the  Tllinois  Securities  Laiu^  respecting  the  securi¬ 
ties  in  question  or  respecting  compliance  or  non-compliance  loith  the 
provisions  of  the  Act  hy  any  issuer,  solicitor,  agent,  hrolcer,  dealer  or 
otvner,  shall  constitute  prima  facie  evidence  of  such  compliance  or  of 
such  non-compliance  ivith  the  provisions  of  this  Act,  as  the  case  may  he, 
and  shall  he  admissihle  in  evidence  m  any  action  at  law  or  in  equity  to 
enforce  the  provisions  of  this  Act.  (As  amended  bv  Act  approved  June 
11,  1921. 

§  38.  Nothing  in  this  Act  shall  be  construed  to  relieve  corpora¬ 
tions  from  making  reports  now  or  hereafter  required  by  law  to  be 
made  to  the  Secretary  of  State  or  paying  the  fees  now  or  hereafter 
to  be  paid  by  corporations.  This  Act  shall  not  be  construed  to  repeal 
any  law  now  in  force  regulating  the  organization  of  corporations  in 
this  State  or  the  admission  of  any  foreign  corporation,  but  the  pro¬ 
visions  of  this  Act  shall  be  construed  to  be  additional  to  any  provision 
regulating  the  organization  of  a  corporation  under  the  laws  of  Illinois 
or  the  admission  of  a  foreign  corporation  to  do  business  in  this  State. 

§  39.  If  the  issuer  of  any  securities  be  a  foreign  corporation,  end 
such  issuer  shall  desire  to  make  sales  of  such  securities  under  the 
provisions  of  this  Act,  no  statement  or  document  relating  to  such 
sales  shall  be  filed  in  the  office  of  the  Secretarv  of  State  until  such 
foreign  corporation  has  complied  with  the  law  regulating  the  admis¬ 
sion  of  foreign  corporations  to  transact  business  in  this  State. 

§  40.  No  prosecution  for  violation  of  any  provision  of  this  Act 
shall  bar  or  be  barred  by  any  prosecution  for  the  violation  of  any  other 
provisions  of  this  Act  or  of  any  other  statute;  but  all  prosecutions  and 
all  civil  actions  to  recover  money  or  for  other  purposes  under  this  Act 
or  based  upon  any  provision  of  this  Act  must  be  commenced  within 
five  years  after  the  commission  of  the  act  complained  of. 

§  41.  The  invalidity  ot  any  section  or  provision  of  this  Act  shall 
not  affect  the  remainder  thereof. 

§  42.  An  Act  entitled,  “An  Act  to  prevent  fraud  in  the  sale  and 
disposition  of  stocks,  bonds  or  other  securities  sold  or  offered  for  sale 
within  the  State  of  Illinois,  by  any  dealer,  firm,  company,  association  oi* 
corporation,  foreign  or  domestic,  by  requiring  an  inspection  of  such 


18 


stocks,  bonds,  or  other  securities  and  an  inspection  of  the  business  of 
such  persons,  firms,  companies,  associations  or  corporations,  including 
dealers  and  agents,  and  such  regulation  and  supervision  of  the  business 
of  said  persons,  fiimis,  companies,  associations  or  corporations,  includ¬ 
ing  dealers  and  agents,  as  may  be  necessary  to  prevent  fraud  in  the  sale 
within  the  State,  of  any  stocks,  bonds  or  other  securities,  and  providing 
penalties  for  the  violation  thereof,^^  filed  June  29,  1917,  in  effect  Janu- 
.  ary  1,  1918,  is  hereby  repealed,  and  all  other  Acts  and  parts  of  Acts 
insofar  as  they  conflict  with  this  Act  are  hereby  repealed. 

It  shall  hereafter  he  unlawful  for  any  person  or  corporation  to 
exhibit  or  in  anv  wise  make  use  of  anv  certificate  issued  by  the  Secre- 
tary  of  State  under  any  of  the  provisions  of  the  Act  hereby  repealed  for 
the  purpose  of  making  or  in  endeavoring  to  make  any  sale  of  securities. 

This  repeal  shall  not  affect  any  contract  rights  which  have  arisen 
under  the  law  hereby  repealed,  or  under  the  administration  thereof,  nor 
invalidate  any  deposits  in  escrow  or  contracts  entered  into  by  the  issuer 
of  securities  for  the  benefit  or  security  of  any  person.  The  Secretary 
of  State  shall  in  all  such  cases  proceed  in  all  respects  touching  such  con¬ 
tracts  and  escrows  as  if  such  law  had  not  been  repealed. 

§  43.  Whereas,  an  emergency  exists,  therefore  this  Act  shall  be 
in  force  and  effect  from  and  after  its  passage  and  approval. 

Approved  June  10,  1919. 


Compiled  by 
Louis  L.  Emmerson, 
Secretary  of  State. 


Illinois' State  Journal  Co. 
Springfield,  Illinois 
19  2  2 


76430— lOM 


